Non-linearity in the Phillips curve: evidence from Nigeria

Olufemi Gbenga Onatunji, Oluwayemisi Kadijat Adeleke and Akintoye Victor Adejumo

African Journal of Economic and Management Studies, 2023, vol. 15, issue 1, 132-144

Abstract: Purpose - This study reinvestigates the validity of the Phillips curve in Nigeria for the period 1980–2020 by considering the asymmetric nexus between unemployment and inflation. Design/methodology/approach - The nonlinear autoregressive distributed lag (NARDL) technique was used to decompose the unemployment variable into two components: tight and loosened labour markets. Findings - The empirical outcome shows that unemployment has a significant negative effect on inflation when the labour market is tight and a weakly negative and significant effect on inflation when the labour market is loose. The study confirms an asymmetric Phillips curve in Nigeria since the positive (tight) unemployment rate exerts a greater effect on inflation than the negative (loosened) unemployment rate. Practical implications - The findings of this study have important implications for implementing monetary policy in Nigeria. Originality/value - To the best of the authors’ knowledge, this is the first study to investigate the existence of a nonlinear Phillip curve in Nigeria.

Keywords: Phillip curve; Unemployment; Inflation; NARDL cointegration; Nigeria; C20; C32; C51; E30; E31 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-10-2022-0418

DOI: 10.1108/AJEMS-10-2022-0418

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